Remuneration Code – MiFID Version

In September last year ESMA published a consultation paper on ‘Guidelines on remuneration policies and practices (MiFID)’ – see Regulatory Roundup 44. Following feedback ESMA has now issued the final guidelines.

This is not the same as the current CRD driven Remuneration Code which is reflected in SYSC 19A nor the AIFMD driven Remuneration Code that will appear in SYSC 19B. Although feedback received included the suggestion that ESMA issue all of its guidance in one consolidated statement, it decided that, the now, three guidelines should be seen as “complementary rather than conflicting”.

Although at heart all three include the capture of risk takers, and/or those that can have a material impact on a firm’s risk profile, there are some tweaks. The AIFMD Remuneration Code also requires firms to look at any entities the AIFM may have outsourced portfolio management or risk management to (‘identified staff’) whereas the MiFID Remuneration Code is conduct-focussed and so will include e.g. sales staff, financial analysts whose literature may be used by sales staff and persons involved in complaints handling as well as outsourced entities and tied agents (‘relevant person’).

The MiFID Remuneration Code guidelines, not surprisingly, include the requirement for the fixed and variable components of total remuneration to be ‘appropriately balanced’ but do not set out any hard and fast rules, leaving it to firms to determine, and justify, what the right balance should be (and page 6 of the guidelines suggest that 100% variable remuneration is not ruled out). The guidelines are described as addressing situations where services are provided to retail clients and, to the extent they are relevant, when services are provided to professional clients. In addition they not only apply to MiFID firms but also to UCITS firms and AIFMs when undertaking permitted additional activities of individual portfolio management or other non-core services e.g. investment advice.

The status of these guidelines is such that the competent authorities of each Member State have to notify ESMA whether they comply – by incorporating them into their supervisory practices – or intend to comply with the guidelines (stating why not if the latter) within two months of the date of publication of the translated versions.

For the ESMA guidelines and press release see links or copy the following links into your browser: and